The recent volatility in the crypto market has been concerning for Bitcoin (BTC). Although the latest FOMC meeting at the U.S. Federal Reserve sparked a short-term uptick in BTC prices, the overall trend remains downward. We do not expect this to change soon; in fact, 2021 could finish on a rocky note, continuing the decline observed through much of the fourth quarter. Several factors support this outlook:
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Ongoing fears about the pandemic driven by the rapid spread of the Omicron variant
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Persistent supply-chain disruptions and elevated inflation in the U.S. and Europe, which could threaten global economic recovery
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Growing discussions around potential regulatory measures in multiple countries
Data source: Tradingview.com
Bitcoin price analysis and forecast
BTC experienced a significant pullback this week. At the time of writing, the mega-cap coin trades slightly above $45,000, roughly 30% below its all-time high of just over $70,000. The technical charts do not look promising in the near term, at least not before the end of the year.
First, the price has already slipped below the 200-day exponential moving average (EMA). It is also highly likely that BTC will test the 200-day simple moving average (SMA) in the coming days. We saw a similar pattern in May 2021, and it took nearly two months for Bitcoin to mount a partial recovery. Given that precedent, a turbulent period for BTC may lie ahead.
Should you buy Bitcoin?
Bitcoin remains an important asset for many investors. While the recent pullback might appear to present a buying opportunity to ride a future upswing, caution is warranted. BTC could decline further before the end of 2021, and some analysts believe the downward trend may persist into early 2022. For that reason, it may be prudent to wait and monitor market developments before making new purchases.